BROOKFIELD, WI — A nationwide survey developed by Towers Perrin and conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS) found employers are cautiously exploring new retiree medical strategies.

The Medicare Modernization Act created more options for employers in terms of their post-65 coverage. Nearly 40% of respondents offering post-65 coverage indicated that they had implemented or are considering an employer-specific Part D plan for their retirees. Almost 30% of respondents offering post-65 coverage have implemented or are considering a Medicare Advantage HMO or PPO option for their retirees.

“Employers are interested in exploring new opportunities in the retiree medical market, especially for Medicare retirees,” said Barry Carleton, principal and Health and Welfare consultant in the HR Services business of Towers Perrin. “But we sense some caution from employers in risking retiree disruption by moving too quickly into an uncertain market. The shift in employer practices appears to be more than evolutionary, but not quite revolutionary. It may take several more years for strategic direction to become clearer.”

57% of the respondents chose to “stay the course” for their 2006 post-65 drug coverage and were therefore eligible for the retiree drug subsidy (RDS). After completing the first year in the RDS process, 81% of these employers experienced problems throughout their first year on the RDS Web site, causing 12% of this group to abandon the RDS process in favor of alternatives.

Costs were a predictable driver of employers’ retiree health care decisions. However, many other factors played a key role, including competitive pressures, early retirement pattern, government’s role in health care and accounting standards.

The survey also examined

Employers’ pre-65 retiree medical approaches

Interest in Medicare Advantage Private Fee for Service (PFFS)

Potential advantages in new Medigap plans

Employers’ choice in retiree medical program carriers

Contribution strategies, including subsidy caps

Future long-term strategies.

This survey, which was conducted in January, is in its third year. There were 157 respondents from corporations and nonprofit organizations. The full survey results are available at www.iscebs.org.

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